Hedging, speculation, and shareholder value☆

Adam, Tim; Fernando, Chitru S.

doi:10.1016/j.jfineco.2005.03.014

Cited by 216 publications

(45 citation statements)

References 48 publications

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“…Secondly, there is a large body of empirical work that investigates the determinants of firms that hedge, using survey data, including Nance et al, 1993 andTufano 1996. More recent empirical work focusses on the impact of hedging on firm value. For example, Allayannis and Weston (2001), Carter et al (2006), Adam and Fernando (2006), Bartram et al (2011), Campello et al (2011 and Perez-Gonzalez and Yun (2013) all report that hedging increases firm value. In contrast, Jin and Jorion (2006) found no relation between hedging and firm value in oil and gas firms.…”

Section: Introductionmentioning

confidence: 99%

Corporate social responsibility and CEO confidence

McCarthy

Oliver

Song

2017

Journal of Banking & Finance

252

151

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This study examines the relationship between firm corporate social responsibility (CSR) and CEO confidence. Research shows that CSR has a hedging feature. Research also shows that more confident CEOs underestimate firm risks, which, in turn, leads them to undertake relatively less hedging. Consistent with this, we find that CEO confidence is negatively related to the level of CSR. Closer analysis shows that this effect is stronger in the institutional aspects of CSR, such as community and workforce diversity, rather than in the technical aspects of CSR, such as corporate governance and product quality. Our results are robust to different competing explanations, including narcissism, which refers in this context to CEOs who engage in CSR to attract attention and alternative proxies for CSR and CEO confidence.JEL Classification: G02, G32, G34

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Section: Introductionmentioning

confidence: 99%

Corporate social responsibility and CEO confidence

McCarthy

Oliver

Song

2017

Journal of Banking & Finance

252

151

View full text Add to dashboard Cite

show abstract

“…Graham & Rogers (2000) find that firm value could also be increased through the rise of debt capability from the utilization of financial instruments. Watching corporations within the gold mining industry, Adam & Fernando (2006) mention that their sample of corporations generates important cash flow gains from their derivative transactions with no compensative adjustment within the firms' systematic risk. They conclude that these cash flow gains had a positive impact on stockholder value.…”

Section: Derivative Usage and Firm Valuation Effectsmentioning

confidence: 99%

“…Companies use different types of hedging strategies like operational hedging, natural hedging, international diversification of business, and so on. The majority of the earlier empirical studies on risk management have used a dichotomous variable that equaled one if a firm used derivatives and zero if it had not (Fauver & Naranjo, 2010;Adam & Fernando, 2006;Gé czy et al, 1997;Nance, 1993;Mian, 1996). As shown in In order to rule out the possible effects of balance sheet control variables on firm value, we followed the extent literature to add a number of control variables to the study.…”

Section: Dependent Variable: Hedgingmentioning

confidence: 99%

Hedge Strategies of Corporate Houses

Nagahi

Nagahisarchoghaei

Soleimani

et al. 2018

JBAR

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This paper compares and contrasts the hedge strategies through derivative instruments by Indian and USA corporate houses. The derivative instruments have little predictive power in explaining corporate hedging strategies both in the USA and Indian firms. The purpose of the study is to provide a setting where reconciling conflicting results from the literature may be appropriate and to compare different hedge strategies in a specific period in two different countries (USA and India). The evidence based on multivariate empirical relations between hedging in American firms and firm's characteristics fails to provide any support for any of the tested hypotheses except for profitability represented by dividend yield. We conclude that the relationship between hedging and dividend yield in the proposed model is negative. The same analysis conducted for Indian companies has shown that there is no statistically significant explanatory variable for hedging; therefore, it is not dependent on any of the predicted theories of hedging. On the other hand, we find some significant relationships between firms' characteristics. Large Indian firms use internal hedge strategies rather than market strategies, such as derivatives. The derivative market development then could play a major role in terms of risk management of firms across countries.

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“…Although, [18] clarifies this problem by stating that a promise to hedge after issuing the debt is not credible as it is not in the stockholder's interest. Further, empirical researches by [53] & [54] gave possibilities of reverse hedging (speculation). Speculation increases riskiness and thus redistributes wealth to shareholders.…”

Section: Costs Of Financial Distressmentioning

confidence: 99%

A Review of Corporate Hedging Models and Their Relevance in Corporate Finance

Gupta¹

2017

TEL

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In this paper, a review of theoretical literature of models providing rational of corporate hedging is done and also addresses the corporate finance issues such as financing and investment. As per definition, hedging is either an insurance contract or an activity reducing the correlation between value and random variable linked with the derivative purchase. It is found that, when considering the modern finance theory after relaxing the assumptions made by Modigliani & Miller, the corporate hedging reduces several costs such as agency cost, distress cost and cost of debt. Also, hedging models are explained reducing the adverse selection problem. An integrated approach based models are also present in the review.

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Hedging, speculation, and shareholder value☆

Cited by 216 publications

References 48 publications

Corporate social responsibility and CEO confidence

Corporate social responsibility and CEO confidence

Hedge Strategies of Corporate Houses

A Review of Corporate Hedging Models and Their Relevance in Corporate Finance

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